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Michael Shapcott, Director, Affordable Housing and Social Innovation, The Wellesley Institute Social Economy Series University of Toronto March 23, 2011 © The Wellesley Institute www.wellesleyinstitute.com Housing finance 101: Three bags of money required for housing Operating $$$s Reserve $$$s Development/ acquisition $$$s © The Wellesley Institute www.wellesleyinstitute.com Ownership housing innovation – 1940s Long-term mortgage and mortgage financing assistance “Job for life, mortgage for life” © The Wellesley Institute www.wellesleyinstitute.com Long-term mortgages Development/ acquisition $$$s Reserve $$$s Operating $$$s Owner obtains loan, various gov’t subsidies and incentives Owner pays, various gov’t subsidies © The Wellesley Institute www.wellesleyinstitute.com Owner pays, various gov’t subsidies Ownership housing innovation – mid-2000s Sub-prime mortgages; complex derivatives “NINJA financing: no income, no asset” © The Wellesley Institute www.wellesleyinstitute.com Sub-prime mortgages Development/ acquisition $$$s Reserve $$$s Operating $$$s ??????????? Owner gets financing, risk bundled into MBSs, etc. ????????? © The Wellesley Institute www.wellesleyinstitute.com Social housing innovation – late 1940s Governmentdeveloped, governmentowned, governmentmanaged “The garden city” © The Wellesley Institute www.wellesleyinstitute.com Public housing financing Development/ acquisition $$$s Reserve $$$s Operating $$$s Government finances Capital reserves (??) Tenant rents and government subsidies © The Wellesley Institute www.wellesleyinstitute.com Social housing innovation – 1973 Funding for community-based non-profit, co-op and municipal housing “Affordable housing is a social right of all Canadians” © The Wellesley Institute www.wellesleyinstitute.com Social housing financing - then Development/ acquisition $$$s Reserve $$$s Operating $$$s Various capital subsidy mechanisms, gov’t backstops mortgage Tenant rents, RGI subsidies © The Wellesley Institute www.wellesleyinstitute.com Capital reserves 1.20% 1.10% 1.00% 0.90% 0.80% 0.70% 0.60% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0.50% Erosion of government investment in social housing over two decades © The Wellesley Institute www.wellesleyinstitute.com Federal housing investments as percentage of GDP As government housing investments erode, homelessness, precarious housing grows Precarious Housing 2010 © The Wellesley Institute www.wellesleyinstitute.com Construction budget – 50-unit seniors housing in Kitchener 2007 Project cost: $6,100,000 Federal / provincial $2,100,000 Municipal $ 194,750 Total government $2,294,750 Government share 38% Donations (land, cash) $1,195,000 Mortgage financing $2,610,250 Total sponsor $3,805,250 Sponsor share 62% © The Wellesley Institute www.wellesleyinstitute.com Federal budget 2009 © The Wellesley Institute www.wellesleyinstitute.com Government of Canada says housing investments are great for economy © The Wellesley Institute www.wellesleyinstitute.com Federal housing agency projects growing net income… …as major cuts set for housing investments CMHC net income: Up 11.5% Overall housing spending: Cut 23.5% © The Wellesley Institute Assisted households: Cut 10.4% www.wellesleyinstitute.com Innovative options required Development/ acquisition $$$s Social venture exchange Social finance © The Wellesley Institute www.wellesleyinstitute.com Innovative options required Operating $$$s © The Wellesley Institute www.wellesleyinstitute.com Thank you! www.wellesleyinstitute.com © The Wellesley Institute www.wellesleyinstitute.com
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